In: Economics
1. The National Park Service has asked you to construct a value of the Grand Canyon. Explain the pros and cons of using the travel cost method to do this. Would you prefer the hedonic method or the stated preference method? Why or why not?
Travel cost method is used to measure the economic value of recreational sites. It includes the full travel costs including time and fees.
Pros:
1. It can be used to measure the cost of any destination that is visited as an amenity.
2. The method can assign values such as consumer surplus etc. in order to eliminate a site.
3. It can be used to measure a change in environmental quality at a recreational site.
4. It helps to find out the policy setting. Example: whether to eliminate or keep a particular recreational site.
5. The method is simpler and is based on actual behaviour.
Cons:
1. The method assumes that the trip is for single use which is not the case.
2. The nature of the modeling of site choice models is not addressed by the method.
3. Suppose people enjoy travel itself, liking the feeling of being out on the road, getting
away from the normal routine. In this case the traveler is obtaining those pure travel benefits
along with those of the recreational site. This would tend to result in the overvaluation of the
recreational site in question.
4. It cannot be used to measure nonuse values.
5. One difficulty with the travel cost method that differs from the broccoli analogy is that those households
with unusually high values for the recreational site can lower the price they pay for it by moving closer to the
recreational site.
Advantages of Hedonic method are: